Using Your IRA to Invest in Israel

Evan Liberman Articles, How To 7 Comments

Wise Money Israel is often asked if U.S. IRA funds can be used to invest in Israel without taking them out early and incurring a penalty to do so.  The answer is yes, this can be done, using a self-directed IRA (Individual Retirement Account), with or without an LLC (Limited Liability Company) structure. The IRA (or IRA-LLC) then opens and invests (funds) the Israeli investment account in Israel in shekels. The U.S. IRA administrator takes care of rolling over your IRA(s) from Traditional, Roth IRA, 401k, 403b, etc. to a self-directed IRA, and does the paperwork for the IRS to keep your tax-deferred status (though the funds are actually outside the U.S. and in the Israeli currency).

Steps to investing your IRA funds in Israel

  1. Contact us to learn more about our partner self-directed IRA custodian firm that works with Israeli brokerages to invest in Israel. Their forms can be filled in online.
  2. Wise Money Israel will pre-populate the Israeli brokerage forms for your signature based on our online form.
  3. Wise Money Israel will direct you how to have your passport/driver's license certified, allowing you to open the Israeli brokerage firm from anywhere in the world via mail.
  4. Direct the IRA custodian firm to wire transfer your funds to the Israeli brokerage's bank.

Do I need an LLC?

No. A simple, self-directed IRA can invest in foreign securities directly, without the need for an LLC. Having an LLC in the middle allows to you allocate your self-directed IRA to more than just an Israeli brokerage ("check writing privileges"). This method is more costly and complicated, as the LLC opening the Israeli account must itself be certified via mailed documentation, maintain a separate bank account, and pay yearly state registration fees to keep the LLC open.

Therefore, if you want to have your self-directed IRA directly invest in your individual Israeli investment account, that can be accomplished directly and simply with only a self-directed IRA.

Will I be taxed?

No. A self-directed IRA can invest in foreign securities while retaining the U.S. tax-deferred status of an IRA.

As a non-Israel entity, your IRA funds will not be taxed in Israel on stock gains, corporate bond interest or corporate bond capital gains.

Also, just as your IRA is today exempt from paying taxes on gains immediately upon their sale, so too your Israeli gains in your self-directed IRA will not be taxed upon the sale of your Israeli securities. So your tax consequences are the same in the IRA whether you hold U.S. securities or Israeli securities. This allow the tax-deferred compounding effect on your gains enjoyed by retirement accounts, which typically greatly enhances your final return.

How do I invest the funds?

The self-directed IRA designates you as both the beneficiary and the power of attorney for the Israeli brokerage account. You may then direct which investments to make yourself, with hourly consulting, or with the help of a licensed account manager such as Wise Money Israel or others.

WMI assists clients in opening IRA, individual, joint, partnership, or corporate/organizational investments accounts, and to invest wisely in Israeli stocks, bonds, mutual funds, ETFs, etc. For more information, please contact us.

Comments 7

  1. Pingback: 7 Ways to Invest in Israel Without Living There — Wise Money Israel

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  3. I would like to have some specific information concerning how I can move my IRA from my present Charles Schwab managed account to some comparable Israeli managed account. I am very concerned for both the “house of cards” economy of the US, and most concerned with the upcoming Shemitah 29th of eliul. I need something safe, and out from under the US dollar.

  4. I have done an in-service distribution from a 401K to an IRA in anticipation of full retirement in about three (3) years. My IRA is at aprox. $400.000.00. I told my adviser with RBC I am committed to supporting Israel so he suggested investing 10% in Israeli funds. I have about $38,000 (Current Value) in Ishares McSi Israel Capped (EIS). It has been rather sluggish as of late. He said this is the only fund that RBC Dain Rousher has to offer that is in Israel.
    I have been thinking of making a change with maybe a larger dollar commitment to Israel in Funds that are better yeilding.
    I would appreciate any advise and/or any preliminary paper work I should submit.
    Psalm 137:5

    God Bless
    Monte W Holty

  5. Type Description

    Security – Equity Ishares McSi Israel Capped
    Etf EIS $ 38329.50 9.56%

    Security – Mutual Fund Amcap Fd Inc
    Shs Cl F 2 AMCFX 43472.45 10.84%

    Security – Mutual Fund Amg Tr Iv
    Mngrs Fairpointe Mdcp Fd Cl I ABMIX 11486.06 2.86%

    Security – Mutual Fund Conestoga Fds
    Small Cap Fd CCASX 7094.98 1.77%

    Security – Mutual Fund Cullen High Divid Equity
    Fd Cl I CHDVX 31446.62 7.84%

    Security – Mutual Fund Diamond Hill Fds
    Small Cap Fd Cl I Shs DHSIX 14427.35 3.60%

    Security – Mutual Fund Dodge & Cox Income Fund DODIX 36200.14 9.03%

    Security – Mutual Fund Dodge & Cox Stock Fund DODGX 45122.75 11.25%

    Security – Mutual Fund Europacific Growth Fd
    Shs Cl F-2 22885.18 5.71%

    Security – Mutual Fund Jensen Portfolio Inc
    Cl I JENIX 35557.41 8.87%

    Security – Mutual Fund Metropolitan West Fds
    Total Return Bd Fd Cl I MWTIX 53383.84 13.31%

    Security – Mutual Fund Vanguard Fixed Inc Secs Fd
    Inc Short Term Invt Grade Fund VFSTX 35942.67 8.96%

    Security – Mutual Fund Virtus Opportunities Tr
    Emerging Mkts Opptys Fd Cl I HIEMX 14655.88 3.65%

    Security – Mutual Fund Wells Fargo
    Special Mid Cap Value Fd Admin WFMDX 11063.36 2.76%

    $401,068 100.00%

    CURRENT PORTFOLIO

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